According to a report released Friday, sales of existing homes rebounded sharply in September to their highest level in two years, in part due to a strong boost from first-time homebuyers.
Sales of previously-owned homes jumped 9.4% in September after falling for the first time in four months in August, said the National Association of Realtors. Information from a NAR report to be released next month suggests first-time homebuyers accounted for more than 45% of home sales in the past year.
"Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home," said Lawrence Yun, NAR chief economist.
Yun said the market is still underperforming as the prices of homes continue to fall.
The $8,000 tax credit that has helped first-time home buyers take advantage of the most affordable conditions since 1970, but the looming expiration date of the incentive could hold buyers back from entering the market, said NAR president and real estate broker Charles McMillan.
To help boost home prices and sales, lawmakers are considering extending the tax credit and expanding it to all but the wealthiest homebuyers.
While keeping the credit would help lift housing prices, senior economist at PNC Robert Dye says it would only be a temporary effect until the program stopped, as was seen with Cash for Clunkers.
"First-time homebuyers don't represent the bulk of the market and there is strength well beyond them," said Dye. "If economic indicators such as consumer confidence show improving trends, then experienced homebuyers will stay in the market and take advantage of [the low] prices" even without the credit.
Buyers: Prices are low and the market is moving. Time to buy.
Sellers: Buyers are starting to have more confidence.
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